Purpose-driven startups have been widely discussed in recent months. Purpose seems to be this big word that people are starting to use more and more when referring to companies that… care! Purpose-driven companies are in fact businesses that have made it part of their core mission to have a positive social or environmental impact through their business model. 

However, it’s important to clarify that purpose-driven companies have nothing to do with non-profits. Their aim is still to make a profit, but it’s not the only one. When a regular startup scales, their revenue scales. When a purpose-driven company scales, their impact will grow alongside their bottom line. 

In other words, purpose-driven startups are the next generation of business. Where sustainability isn’t just an add-on or nice to have, but it’s significantly embedded into the company’s core mission and operations.

So what are the benefits of building a purpose-driven startup compared to a regular startup?

1) Purpose-driven startups have the potential to attract the best talent

Traditionally, one of the most important things investors care about in a startup is people. And there’s a reason for that. Roughly 15% of startups usually fail because they didn’t have the right team. Quite simply, people will determine whether your company will make it or not. 

The good news? Purpose-driven startups have the potential to attract and retain the best possible talent out there. 

In fact, 83% of Gen Z employees consider a company’s purpose when deciding where to work. Additionally, the percentage of employees feeling motivated at purpose-driven companies is 63%, compared to only 31% at regular companies. Similarly, 65% of employees working for purpose-driven businesses say they’re passionate about their work, versus 32% at other companies (PwC, 2019).

So you do see where I’m going with this… purpose is the future. And as younger generations enter the market the case for purpose-driven companies will become even stronger. It’s a path set for success.

Don’t take my word for it though, here’s how younger generations are changing the future of business.

2) Purpose-driven startups have the potential to attract more customers

Whether you’re a B2C or a B2B company, purpose will make your business more attractive to customers. In the UK we’re seeing a massive difference between purpose-driven businesses and regular ones, with certified B Corps growing 28 times faster than the national average.

For a B2C brand the benefits are clear and abundant…

64% of global consumers find brands that actively communicate their purpose more attractive. While 79% claim they’re more loyal to purpose brands. 

If you’re a B2B instead just think about the bigger picture here for a second. Purpose-driven businesses are becoming more and more “a thing” in our economy (luckily!). And for companies that aren’t purpose driven, most of them will anyway have some kind of sustainability and social responsibility target they need to achieve. And this is true especially if your customers are large enterprises. 

Now you and your competitor might be solving a similar problem for your customers. But guess what? When you’re purpose-driven you’re also helping them achieve sustainability objectives, thanks to your purpose and impact. This means you’re way ahead of the competition and as interest in sustainability grows so will demand for your purpose-driven product or service. 

3) Purpose-driven startups have the potential to attract the best investors out there

A few weeks ago I received an email from Techstars with their latest newsletter. Only this time it was different. Techstars has started to look at how their portfolio companies are addressing the UN Sustainable Development Goals. This is now a big priority to them. 

Similarly, when we participated in the London School of Economics 2020 Accelerator programme, as part of our application we were asked to demonstrate how our startup impacted at least 2 of the SDGs. 

In a recent guest blog-interview with LSE Generate Head LJ Silverman she said…

Investors are looking at a company’s ESG [Environmental, Social, Governance] when deciding whether to drive a business deal forward. And that requirement seems to be something that is moving further up the priority list. 

And she’s right! In 2020 alone, 85% of investors considered ESG factors when evaluating investment opportunities. Meanwhile, investments into purpose-driven companies more than doubled from 2018 to 2019. Fellow entrepreneurs I’ll let you in on a secret: That’s huge!

Purpose-driven investors
Source: Slush.org

So how can you ride this wave? LJ continues…

Startups can send a transformative message to VCs and investors about their abilities to manage ESG risks. How? First of all, publicly and consistently adhere to the SDGs. Then, fully embed the SDGs into your strategic plans. And additionally, measure, monitor and make available your progress towards achieving the SDGs.

You can read the full interview here.

Overall, purpose-driven companies are the future of business. Employees know it. Customers know it. Investors know it. It’s about time you do too. 

So if you’re into attracting the best talent, customers and investors give us a shout. We can help you identify your core SDGs, engage your stakeholders and become a purpose-driven company that wins.